South African Revenue Service (SARS) Commissioner Edward Kieswetter has called on National Treasuries to exclude tax administrations from across-the-board austerity measures, as it poses a threat to innovation, fiscal integrity and sovereignty.
“Once you suspend funding, the end result will always be the suspension of innovation and regression against the progress of other administrations. This goes against the intrinsic value of digitalisation in improving tax compliance and detecting tax non-compliance,” Kieswetter said on Tuesday in Cape Town.
He was addressing the 2nd Network of Tax Organisation (NTO) Technical Conference, which took place under the theme: ‘Digitalisation of Tax Administrations and Contemporary Issues’.
“As more financial transactions are taking place digitally, more third party data sources are shared with tax administrations, and central bank digital currencies are emerging, the importance of digitalisation and consequently the use of data science, and artificial intelligence have become central to revenue collection, compliance and trade facilitation.
“So, in short, whenever budget cuts are required, National Treasuries – Budget Offices are advised to avoid across-the-board cuts and ensure a more prudent approach to invest to build enabling and productive economic capacity, create employment, and thus expand the tax base.
“This secures fiscal integrity and sovereignty in the long run. Tax administrations should be excluded from across-the-board austerity measures. The investment in digitalisation should not be disrupted. The cost of recovery is simply too high in every respect,” Kieswetter said.
He said the COVID-19 pandemic accelerated the modernisation and digitisation of work at SARS.
“COVID-19 inadvertently took us to the drawing board to think from first principles, and very quickly accelerated our response towards reprioritising our technology investment to enable our employees to work during the hard lockdown and to allow taxpayers to continue to fulfil their tax obligations,” the Commissioner said.
Although SARS has made progress, he explained that much more still needs to be done, as the revenue service is behind in its digitalisation journey.
“I want to pause here and focus on one element as a critical enabler of the digitalisation journey – and that relates to funding. Before State capture, SARS was a leader in digital modernisation for many years.
“However, partly due to financial constraints, but also a short-term approach, budgets were then frozen for a number of years and SARS fell behind in driving technological innovation. We have now managed to restore some additional funds to continue our modernisation, but we are still substantially underfunded to move at the necessary speed in an environment that is changing exponentially, business models are being disrupted, and tax crime proliferating at an alarming rate,” he said.
SARS faces the challenge of not only having to play catch-up after many years of underinvestment, but also of accelerating modernisation simply to remain relevant.
“We are at a point where we can again focus on innovation. The important lesson here is that the digitalisation journey is not a finite project, but a new way of being. It is an ongoing journey. Once you suspend funding, the end result will always be the suspension of innovation and regression against the progress of other administrations,” the Commissioner said.